When new users visit the site, we'll provide them with a stock-ISO, as well as a ROM-O-Matic/build-your-own-SLAX style customizable image.
But I'm not sure which distro to choose yet. And really, a lot of our value-add is in the "glue" module that 1) parses the config file, 2) ties all the pre-existing components together, and 3) makes all the available hard-to-learn wizardry available in a single easy-to-use package. So we're more like Linux Router Project or Clonezilla than we are GRUB. That is, one significant deliverable will be the single central script that calls all the other available utilties. At the same time, it's important to deliver a very polished distro to the end-user, so that may become an important deliverable as well.
That said, I think that Micro Core is the obvious distro to base our work on right now.
Answer: Nobody uses Perl/Lua in initrds. Bash/C, sure. Space is definitely still an issue for us, even if we're targetting ~10mb.
What languages get used for heavy embedded scripting? Ksh? (zsh is 0.5mb, while the bare Perl interpretter is 1.0mb, and libruby.so is 0.75mb)
GRUB2 uses Lua.